Healthcare costs are a major concern for individuals, employers and governments at the local, state, and federal level. There are a wide variety of programs available that provide individuals, employers and governments various ways to directly control their healthcare costs, such as group health insurance, individual health insurance, healthcare savings accounts, and the like. These programs give individuals and organizations options to reduce, limit, or cap their costs through the purchase of insurance or saving for healthcare expenses in a tax advantaged manner. All of these programs focus on how healthcare expenses will be paid. But a majority of healthcare expenses could be avoided as they are associated with disease and morbidity that could be avoided.
Health insurers and other payers are beginning to focus more on how healthcare costs can be avoided by offering programs ranging from disease management to wellness and prevention. They are also beginning to attach financial incentives and penalties to insureds taking specific actions to improve their health or to actually improving their health. For example, the Affordable Care Act (H.R. 3590) which passed in March of 2010, expands the ability of insurers to use incentives and penalties to incentivize desired behavior or desired health outcomes. All of these programs, however, are limited by several factors including: (1) They are limited in their timeframes, with most incentives and penalties associated with behaviors or outcomes in a 12 month plan year, (2) they are limited in size, with most incentives ranging from a few dollars to a few hundred dollars, (3) they are generally focused on process instead of outcomes, with the incentives being linked to members taking actions like completing Health Risk Assessments, joining a gym, or getting an annual physical, instead of being linked to actual improvements in the insured's health.
There are also a seemingly infinite variety of ways for individuals to take actions to improve their health on their own, ranging from routine health checkups and screenings to memberships in health clubs and fitness centers; from simply walking thirty minutes a day to elaborate, personalized diet and exercise regimes; from quitting smoking to eating healthier, more natural foods. But these approaches do not provide any direct or near term financial benefit for the individual. While these actions may well result in improved health, decreased morbidity, and lower healthcare expenses, the financial benefit is not immediate or even near term. Further, the apparent “rewards” for not following a good health regime seem to be great as evidenced by the epidemic of chronic (largely preventable) diseases stemming from these behaviors including obesity, arthritis, some types of cancer, type-2 diabetes, sleep apnea, and so forth. In addition, the financial benefit is often in the form of avoided healthcare expenses which are very indirect and provide less of an incentive. In short, these approaches do not provide any direct financial benefit to the individual for improving their health during specific periods based on particular measure of health outcomes.